China's Indicators Point to Slowing Economy

BEIJING – With the Chinese leadership's 2017 growth target secure, the economy showed signs of slowing in October after Beijing dialed back stimulus efforts and closed northern factories around a big Communist Party meeting.

Growth in factory output, fixed-asset investment and retail sales all slowed a tad in October, as Beijing imposed tighter pollution controls and continued restrictions on home purchases in the country's big cities.

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Industrial output, a rough proxy for economic growth, expanded by 6.2% in October compared with a 6.6% increase the month before, according to data released by the National Bureau of Statistics on Tuesday. The reading, though it met economists' estimates, was the second slowest this year.

Economists say the slower output growth was a result of Beijing's antipollution crackdown and a production halt in northern China as Chinese leaders gathered in the capital last month for a twice-a-decade party congress.

Fixed-asset investment climbed 7.3% in the January-October period from a year earlier, slowing from a 7.5% increase in the first nine months and hitting the slowest pace since December 1999. Slower property investment was the main factor dragging down total investment, economists say.

"The cooling real-estate market is the biggest downside risk for the Chinese economy next year," said Liu Xuezhi, an economist with Bank of Communications.

China's housing sales slowed further in October as the government's property-buying controls continued to chill the market. Housing sales by value dropped 3.4% from a year earlier in October, compared with a 2.4% decrease in September.

Property investment expanded at 7.8% in the January-October period, though Mr. Liu expects it to be below total investment growth next year and expects slower home sales will mean demand for furniture, home appliances and construction materials will shrink accordingly.

China's retail sales grew 10.0% in October from a year earlier, down from a 10.3% increase in September. The reading was the slowest in eight months and below market expectations.

"Both investment and fiscal spending have decreased, indicating that the government has pulled back some stimulus as the whole-year growth is on track to beat the 6.5% target," said Zhou Hao, an economist with Commerzbank AG.

Helped by robust foreign demand and state investment, China posted robust 6.9% growth in the first three quarters of the year, well above expectations at the beginning of the year.

With the annual growth target of at least 6.5% well within reach, Beijing is likely to turn its focus back to reducing industrial overcapacity and excessive borrowing, economists say. Government spending saw a rare on-year decline in October while banks sharply scaled back lending last month.

"At the end of the day, China still intends to strike a balance between growth, debt and leveraging," Mr. Zhou said, adding that the Chinese economy is expected to slow further in coming months.